Nat-Gas Prices Give Up Early Gains as US Forecasts Warm

November Nymex natural gas prices declined 0.98% on Thursday, primarily driven by updated warmer US weather forecasts for mid-October, which prompted long liquidation and overshadowed an initially bullish smaller-than-expected weekly storage build of +53 bcf. Despite the modest storage injection, overall US natural gas inventories remain 5.0% above their five-year seasonal average, supported by near-record high domestic production and an upward revision to the 2025 production forecast, indicating a well-supplied market grappling with fluctuating short-term demand outlooks.

Analysis

November Nymex natural gas (NGX25) prices reversed from a 2.5-month high to close down 0.98%, as long liquidation was triggered by updated forecasts for warmer-than-normal US temperatures from October 12-16, which are expected to reduce heating demand. This bearish weather outlook overshadowed an otherwise bullish weekly EIA report, which showed a smaller-than-expected inventory build of +53 bcf, well below the +64 bcf market consensus and the +85 bcf five-year average. Despite this modest weekly injection, the fundamental supply picture remains a significant headwind. US dry gas production is near a record high at 107.1 bcf/day (+4.9% y/y), and the EIA recently revised its 2025 production forecast upward. Consequently, total US gas inventories stand 5.0% above their five-year seasonal average, signaling adequate supply. While falling domestic gas demand (-4.4% y/y) and a weekly drop in LNG export flows (-2.6% w/w) add to bearish pressure, rising US electricity output (+5.96% y/y) and below-average gas storage in Europe (85% full vs. 90% average) provide underlying support factors.

Key Decisions for Investors

• Investors should recognize that the significant supply overhang, evidenced by near-record production and inventories 5.0% above the five-year average, is likely to cap significant price rallies, making short-term bullish catalysts like inventory reports potentially transient.
• Given the market's immediate negative reaction to warmer weather forecasts, price action is highly sensitive to short-term heating demand expectations; therefore, monitoring meteorological updates is critical for anticipating near-term volatility.
• Consider holding a neutral to cautiously bearish stance until demand signals strengthen, specifically watching for a sustained recovery in LNG export flows or a material shift to colder weather, which would be necessary to challenge the current well-supplied market narrative.